GM Is Getting Sick of High Health-Care Costs

LAS VEGAS — National health-care coverage should be an issue in this year's presidential campaign, says Gary Cowger, president of General Motors Corp.'s North American operations.

“We need to start a discussion on it now,” he tells a J.D. Power & Associates' International Automotive Roundtable held in conjunction with the 2004 National Automobile Dealers Assn. convention here.

Cowger says GM, the nation's largest purchaser of health-care insurance, is suffering from the burden of spending $4.5 billion annually covering 1.2 million workers, retirees and their spouses.

“That's more than we spend on steel,” he says. “It adds $1,200 to the cost of each GM vehicle.

Government-funded national health care “is probably a bridge too far, but we've got to work something out. We need creative ideas on the table. GM competes globally with auto makers from countries with national health-care programs.”

The recent medical reform bill “is a small step” towards reforming a system with costs that nationally increase 14% a year and make up 14.9% of the gross domestic product.

“Rising health care costs threaten the stability of our industry,” says Cowger in calling for a change.

Meanwhile, he says most people have no idea of the transformation GM has undergone since the early 1990s.

“Few people outside GM really grasp the changes,” he says. “A dozen years ago GM found itself in a difficult situation, reacting too slowly to what was around us and having a bunch of autonomous divisions.”

Under retired CEO Jack Smith and successor Rick Wagoner, GM made divisions less self-ruling, consolidated 27 purchasing groups into one, 12 engineering groups into one and developed a sense of urgency.

It wasn't easy. “It was like changing pistons when the engine was running,” says Cowger.

He adds, “Some changes defied explanation and required mid-course corrections. For example, there's no confusion today about what a brand is.”

Among the revamping benefits: GM has significantly improved its vehicle quality and cut product development time by half.

“It's not like we had a choice,” says Cowger. “It was necessary to compete. This is a journey, not an event.”